How to Handle Medical Bankruptcy

Christian Worstell
In this article...
  • Explore the common causes of medical bankruptcies and learn ways to avoid bankruptcy. Explore the financial consequences of declaring Chapter 7 bankruptcy and how to file.

Medical bankruptcies are a significant concern for many Americans, particularly those nearing Medicare or Social Security eligibility age.

In this guide, we will delve into the complex world of medical debt and provide valuable insights to help you navigate these challenging situations.

Table of Contents:


Understanding Medical Bankruptcy

Medical bankruptcy is a phrase that refers to the monetary effects of high medical costs.

Medical bankruptcies occur when an individual or family accumulates medical debt that cannot be paid off, and they are forced to declare bankruptcy in order to get relief from their medical bills.

Someone in any age group can go through medical bankruptcy, yet is particularly frequent among seniors or those with long-term medical conditions.

The absence of insurance or inadequate protection is often the primary source for financial crisis related to health care. This could include co-pays and deductibles that exceed what an individual can afford, as well as uncovered treatments such as experimental drugs or surgeries not covered by their insurance plan.

Some individuals who don't qualify for government programs like Medicaid due to income restrictions may end up with no other option than filing for bankruptcy protection if they want relief from their mounting medical bills.

Drug expenses that rise annually are a further element adding to medicinal bankruptcies. These increasing expenses often put families in a difficult position, even with adequate insurance coverage.

You can avoid medical bankruptcy by researching options such as:

  • Short-term loans
  • Crowdfunding campaigns
  • Exploring government assistance programs like Medicare and Medicaid
  • Looking into payment plans offered by hospitals and doctors’ offices
  • Negotiating lower rates directly with providers
  • Purchasing supplemental health insurance policies tailored for high-cost treatments
  • Seeking out free clinics/hospitals in the vicinity

The potential long-term repercussions of filing for medical bankruptcy should not be taken lightly.

These can include negative impacts on one's credit score which will make obtaining future loans more difficult or expensive. It may also lead lenders, employers and landlords to deny applications based solely upon a person's past financial misfortunes.

Causes of Medical Bankruptcy

Medical bills are the leading cause of personal bankruptcies in the United States. Various aspects should be thought of when devising strategies for fiscal safety and medical expenses, which can lead to medical debt.

High medical bills are often the cause of filing for medical bankruptcy, as individuals may find themselves unable to pay off their hospital or doctor’s bills after receiving treatment and not having enough money saved up.

Many individuals have difficulty paying their hospital or doctor’s bills after receiving treatment and often don’t have enough money saved up to cover these expenses. 

Another frequent source of bankruptcy is the absence or inadequacy of insurance coverage, leaving many without access to affordable healthcare services and unable to cover costly treatments such as surgery or chemotherapy drugs.

Many employers do not provide adequate health insurance plans which can leave employees without access to affordable healthcare services. 

Other Financial Issues:

Other factors that can contribute towards filing for medical bankruptcy include:

  • Job loss
  • Unexpected illnesses/injuries
  • Disability
  • Long-term unemployment
  • Divorce/separation

Avoiding Medical Bankruptcy

Increasingly, Americans are being forced into medical debt.Budgeting wisely is one of the most effective ways to prevent financial strain.

When creating your budget, make sure that you factor in all necessary expenses, including healthcare costs. Make sure that you are able to cover these expenses before paying for any other discretionary items such as entertainment or travel expenses.

Look into HSAs and FSAs, as they can aid in cutting down expenses for healthcare-related items like doctor visits or medications. They also allow you top provide pre-tax contributions. 

When considering medical bills, it is wise to plan ahead and explore options such as payment plans with providers or cash discounts from providers, charity care programs offered through hospitals and clinics for discounted rates based on income level.

If possible, try to negotiate payment plans with providers prior to receiving services if there’s a chance you won't be able to pay in full at once due financial constraints or lack of insurance coverage for certain procedures or treatments. 

Finally, take advantage of available resources such as Medicaid and Medicare which offer low cost coverage for those who qualify based on their age, disability status, veteran status, family size, location, etc. You may also want to explore supplemental insurance policies that cover gaps in traditional health insurance plans.

By following these steps and budgeting responsibly while taking advantage of available resources whenever possible, individuals should be able to effectively avoid falling victim to medical bankruptcy while still maintaining good physical and financial security over time.

Consequences of Medical Bankruptcy

Filing for bankruptcy can damage your credit score and make it difficult to obtain loans in the future. It’s important to understand the potential repercussions of filing for medical bankruptcy before taking this drastic step.

The most obvious consequence of filing is a decrease in your credit score, which may put you into subprime territory and cause lenders to deny you when applying for new loans or lines of credit.

This could prevent you from purchasing a home, car or other major purchases requiring financing down the line. Additionally, it could affect your ability to get approved for rental agreements or even utilities services as some companies check an applicant's credit history during their vetting process.

Filing also makes it more difficult to secure traditional forms of financing in the future due to its long-term impact on your record with creditors and lenders.

Lenders are likely to view someone who has filed for medical bankruptcy as high risk because they may not be able trust them with repayment if something unexpected were to occur again in their life such as another health crisis resulting in financial hardship once more.

This can have serious legal repercussions, such as creditors seizing certain assets like bank accounts or retirement savings plans that cannot be protected under Chapter 7 Bankruptcy laws – depending on the state's regulations. This makes these assets vulnerable to liquidation if court-ordered debt collection efforts are made against individual filers' names.


Medical bankruptcies can have serious consequences, both financially and emotionally.

To prevent this, it is important to be aware of the factors that can contribute to this financial strain and take proactive steps such as budgeting for healthcare expenses or seeking out available assistance programs.

While there are no guarantees, taking proactive measures such as budgeting for healthcare expenses and seeking out financial assistance programs may help reduce your risk of falling into a situation where medical bankruptcies become necessary. 

Christian Worstell
About the Author

Christian Worstell is a senior Medicare and health insurance writer with He is also a licensed health insurance agent. Christian is well-known in the insurance industry for the thousands of educational articles he’s written, helping Americans better understand their health insurance and Medicare coverage.

Christian’s work as a Medicare expert has appeared in several top-tier and trade news outlets including Forbes, MarketWatch, WebMD and Yahoo! Finance.

While at HelpAdvisor, Christian has written hundreds of articles that teach Medicare beneficiaries the best practices for navigating Medicare. His articles are read by thousands of older Americans each month. By better understanding their health care coverage, readers may hopefully learn how to limit their out-of-pocket Medicare spending and access quality medical care.

Christian’s passion for his role stems from his desire to make a difference in the senior community. He strongly believes that the more beneficiaries know about their Medicare coverage, the better their overall health and wellness is as a result.

A current resident of Raleigh, Christian is a graduate of Shippensburg University with a bachelor’s degree in journalism. You can find Christian’s most recent articles in our blog.

If you’re a member of the media looking to connect with Christian, please don’t hesitate to email our public relations team at

Read More
Someone holding credit card while typing on computer
Learn how to close a bank account. Find out what you need to do to close individual accounts, joint ...
A couple smile while she uses her smart phone
Do you get money back on term life insurance? In most cases, the answer is no. Explore traditional ...
Woman and adult daughter embrace and smile while sitting on home front steps
Cigna and Kaiser Permanente are two of the top insurance companies in the U.S. that offer Medicare ...